After a significant jump in healthcare spending in 2020 with the onset of the COVID-19 pandemic, healthcare spending in the United States only increased 2.7% in 2021, according to new analysis from the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS), published in Health Affairs.
Healthcare spending in 2021 reached a whopping $4.3 trillion, or $12,914 per person. That increase is well below the gross domestic product (GDP), which jumped 10.7% in 2021––the largest growth rate since 1984. In addition, the share of healthcare spending within the economy, as measured by GDP, fell to 18.3% in 2021, down from 19.7% in 2020.
The fall in spending corresponded with increases in use of healthcare services and goods, as well as a decline in federal government healthcare spending. While federal spending for COVID-19 was still ongoing in 2021, it was a much lower level compared to 2020, and this decline in federal spending was the driver for less growth in overall spending last year. Additionally federal spending for the Provider Relief Fund and the Paycheck Protection Program declined 62.7%, to $71.9 billion in 2021 from $193.1 billion in 2020. Federal spending for public health activity, which included vaccine development and health facility preparedness funding, decreased nearly 42% to $78.8 billion in 2021, down from $135.8 billion in 2020.
“The slower rate of healthcare spending in 2021 was driven by a decline in federal government expenditures for healthcare after a spike in 2020 that occurred largely in response to the COVID-19 pandemic,” Anne B. Martin, an economist in the CMS Office of the Actuary and first author of the Health Affairs article, said in a statement. “The trends in healthcare spending in 2021 are linked to the many unique impacts of the COVID-19 pandemic, including the substantially reduced federal COVID-19 supplemental and public health expenditures and an increase in the use of healthcare goods and services as people sought care at a higher rate than in 2020.”
Increases seen for insured patients in 2021, but may decline after COVID
There also was a significant uptick in insured Americans in 2021, with the number of uninsured individuals declining from 31.2 million in 2020 to 28.5 million in 2021. Marketplace enrollment increased 13.4%, while Medicaid enrollment grew 11.2%—the largest growth since 2015. The Medicaid expansion was thanks to changes from the Biden administration that vastly expanded Medicaid eligibility. That expansion is set to expire when the public emergency (PHE) first implemented at the start of the COVID-19 pandemic ends.
Among the major payers, private health insurance spending grew 5.8% in 2021, reaching $1.2 trillion and accounting for 28% of all healthcare spending. Medicare spending grew 8.4%, accounting for 21% of total national health spending at $900.8 billion. Medicaid expenditures marked a 9.2% growth, reaching $734 billion and representing 17% of the total spending share. And out-of-pocket spending grew 10.4% during the year, hitting $433.2 billion and accounting for 10% of total health expenditures.
Healthcare spending impacted by COVID
Spending among major goods and services rose 4.4% for hospital spending in 2021, reaching $1.3 trillion. Physician and clinical services rose 5.6% to reach $864.6 billion, and retail prescription drugs grew 7.8% for total spending of $378 billion in 2021.
The 2021 health spending trends were notably impacted by the COVID-19 pandemic, and CMS expects future health expenditures to continue to be affected.
“In the near term, the severity of the COVID-19 pandemic and its impacts on healthcare spending trends are expected to lessen while at the same time, federal COVID-19 funding continues to unwind and utilization trends stabilize,” Martin and colleagues wrote. “However, there is still substantial uncertainty associated with this disease, which could have significant effects on future healthcare spending trends.”
In addition to the pandemic impacts, rocky economic headwinds will also likely be a factor in healthcare expenditures in the near future.
Amy joined TriMed Media as a Senior Writer for HealthExec after covering home care for three years. When not writing about all things healthcare, she fulfills her lifelong dream of becoming a pirate by sailing in regattas and enjoying rum. Fun fact: she sailed 333 miles across Lake Michigan in the Chicago Yacht Club "Race to Mackinac."